JOHANNESBURG (Reuters) – South Africa’s rand firmed on Thursday, recovering earlier losses on bets that new political leaders will support economic reform after strong data from the United States had dampened sentiment.
New South African bank notes featuring an image of former South African
At 1527 GMT the rand had firmed 0.28 percent to 12.3300 per dollar, a touch softer from a session best 12.2325 having started trade on the backfoot.
Strong U.S. manufacturing and construction data, and a more hawkish than anticipated tone in the Federal Reserve’s Dec. 12-13 meeting, lifted the dollar on Wednesday and pressured the rand early on.
Continued speculation that President Jacob Zuma’s term, which ends in 2019, would be cut short after Cyril Ramaphosa was elected his successor as head of the African National Congress (ANC) two weeks ago.
The rand rallied to its firmest level in 2-1/2 years after Ramaphosa’s victory, gaining nearly 8 percent in the last two months on hopes of improved policy and political certainty that could spur an ailing economy.
Traders said the rand’s gains were overdone and out of step with the economic fundamentals, and that Ramaphosa’s narrow victory would constrain any major policy reforms.
On Thursday data showed private-sector economic activity contracted for a fifth consecutive month to a 20-month low in December as factory output and new orders fell.
On the bourse, investors piled into Steinhoff, betting a sell-off prompted by the company’s discovery of irregularities in its accounts may have pushed the stock to levels from which it could only go up.
The stock jumped 22 percent to 8.6 rand, extending gains to the third straight session, although it is still down about 80 percent since the accountancy scandal broke early last month.
The benchmark JSE Top-40 index ended 0.3 percent down at 52,662 and the broader All-share index lost 0.26 percent to 59,476.
In fixed income, government bonds were firmer, with the yield on the government bond due in 2026 down 7 basis points to 8.55 percent.
Reporting by Mfuneko Toyana and Tiisetso Motsoeneng; Editing by Joe Brock